What's Holding Biofuels Back?

What's Holding Biofuels Back?

The penalties would give the oil companies a reason to support the construction of cellulosic biofuels plants, says Wes Bolsen, VP of government affairs at Coskata, based in Warrenville, IL. “You need to put a stick in the oil companies’ backs to say, you need to start building something to meet your obligation under the Renewable Fuels Standard,” he says.

The mandates, even in their reduced form, are somewhat helpful. They guarantee a market for the cellulosic fuel produced, since the EPA says it will match the mandate to what cellulosic biofuels companies can produce. But Bolsen and others say this isn’t enough to overcome the risk aversion of the banks. Unlike wind and solar projects, banks are particularly reluctant to finance cellulosic biofuels plants because no commercial ones have yet been built. “It’s really about getting the first plant built,” Bolsen says. If that plant is successful, he believes this would prove to investors that the technology works, and make them more willing to invest in other plants. “After the first plant is open, banks will be begging to help finance them,” he says.

Industry representatives are calling for other changes to help get money flowing for new biorefineries. Some would like President Obama to instruct the U.S. Department of Energy to be more lenient in its requirements for loan guarantees to support new plants. Many also support a provision in a bill now being considered in Congress that would provide a large tax credit on investments in advanced biofuels plants–something they argue would put biofuels on par with solar and wind projects, which already qualify for such help.

But not everyone thinks so much government support is necessary. Funding can be found, says Carrie Atiyeh, director of public affairs at ZeaChem, based in Lakewood, CO, but the industry might not grow as fast as the government intends. “If the EPA is really serious about its goal of 16 billion gallons by 2022, we will need some initial help to accelerate the process.”